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Insights from Alberto Matellan, chief economist at MAPFRE, the largest insurance company in Spain and Latin America.
The worst macroeconomic situation is beginning to be felt in the real estate sector.
Alberto Matellan, chief economist at MAPFRE Inversion, explains that the real estate sector is one of those most affected by interest rate hikes, and what we're now seeing is that very impact. "Transactions grind to a halt and prices start to fall," he noted.
However, he believes that the situation is different from that experienced around 2007 because the greatest impact is on balance sheets.
"Real estate holdings are assets and many companies and families have them on their balance sheets, while mortgages constitute liabilities. A bank may have both real estate and mortgages in its assets. The problem is that when properties fall in value, balance sheets fall out of sync and solvency problems can arise," he explains. "That's what happened in 2007 and 2008, but I don't think it's what's happening now, for a number of reasons. The first is that the balance sheets are healthier. The second is that liability levels are lower, and the third is that the price falls right now are less pronounced. It's a problem, but it's already been factored in."
Not all asset classes are performing similarly to real estate. Equities closed out the first half of the year with very attractive yields, both in the United States and Europe, where Matell...................... To view our full article Click here
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